The immediate aftermath of the QE2 (the Federal Reserve’s Plan B quantitative easing strategy) announcement has not gone well: Mortgages rose to their two-month highs, near 4.25 percent, and the yield of 30-year T-bonds exploded from 3.93 percent to 4.32 percent.

QE2 has an immediate problem: Treasury yields are stone low because the whole world ran to our paper for safety, and now the Fed proposes to make that paper unsafe by printing cash to finance it. However, it is early: the Fed has yet to buy the first QE2 Treasurys, and the event will go better than the news.